Why has Brent crude climbed 12.5% over the past month?
Brent is 111.7 this morning, up 12.5% over the past month, and that number is also the 30-day high. The low over the same stretch was 74.16. A move that size changes what a fuel operator pays for everything downstream, so the question is what pushed it and whether the push reaches the rack.
The first check is WTI, because if U.S. crude moved the same way, the cause is likely sitting inside the American supply picture. WTI is 101.05, up 5.4% over 30 days, with a high of 105.83 and a low of 71.41. Brent climbed better than twice as fast as WTI. When the international benchmark pulls away from the domestic one like that, the driver is usually offshore, not in the Permian. CNBC has Brent at a five-month high "amid Mideast tensions," and Rigzone ran a piece asking why WTI was outrunning Brent on an intraday basis, which tells you the two are trading on different news. Over the full month, Brent won.
U.S. natural gas storage is 3567, up 8.2%, and the 30-day high as well. Henry Hub is 3.032, up 5.0%. Domestic gas supply looks comfortable, inventories building. None of that reads like a country short of energy. It reinforces the read that Brent's climb is a geopolitical risk premium on waterborne crude rather than a tightness that U.S. fundamentals share.
So crude went up on fear offshore. The next question is whether the finished products went up with it, because that is the part an operator actually buys and sells.
RBOB gasoline is 3.134, down 3.7% over 30 days. Gasoline fell while crude rose. CStore Decisions reports the national pump average dipped a few cents to $4.33, citing AAA, with prices staying flat even as crude stayed high. Gasoline, the biggest product by volume, is not following crude up right now. For a retailer that is a decent setup, because your street price is holding while the wholesale side eased.
The 3:2:1 crack spread is 53.74, down 10.0 over 30 days. The crack spread is the refiner's blended margin on turning three barrels of crude into two of gasoline and one of distillate, and it narrowed as crude climbed and gasoline slipped. A refiner's cushion over the month got thinner. On its face that argues refiners are the ones carrying the cost of this crude move, since they bought dearer barrels and could not pass all of it into gasoline.
The margin story does not hold together if you stop at gasoline, though, because the crack is a blend and one leg of it is behaving very differently.
Diesel is the leg. The diesel retail-to-wholesale spread is 1.456, up 0.133 over the month. The Sunday Independent ran a piece on why diesel is rising faster than crude. JobbersWorld reports tight diesel supplies supporting "exceptionally high refining margins in some regions," while higher shipping and insurance costs cut the other way elsewhere. So within that compressed blended crack, gasoline is weak and diesel is strong, and the diesel strength is what is keeping refiners in the game. A refiner heavy on distillate yield is having a good month on that barrel even as the headline crack falls.
Refinery utilization is 16.615, down 4.1% over 30 days, off a high of 17.586. Less crude is being run than a month ago. Part of the diesel tightness is right there. If runs are down and distillate demand holds, the diesel spread widening makes sense without anyone doing anything clever. There are reasons for the lower runs in the wire too. News12 reports workers locked out at the Bayway refinery in New Jersey over a contract dispute, with overnight picketing. One large East Coast plant running short-handed or down pulls supply off the Atlantic market, and Bayway sits close to the diesel demand that the spread is rewarding.
The international refining picture adds a second reason runs are soft. Africa Oil+Gas Report writes that Africa's refinery expansion faces weaker margins that may weigh on plant profitability. New capacity coming on into thin margins does not encourage anyone to run flat out. Weak margins and lower utilization fit together.
The easy explanation did not hold up for me. A 12.5% crude jump reads like fuel getting more expensive across the board, with operators paying more for everything. The gasoline number says no. RBOB is down 3.7% and the pump is flat at $4.33. The crude rise is real, but it is concentrated in Brent and it is reaching diesel far more than gasoline.
What I am sure of: Brent's 12.5% climb is led by the international benchmark, with WTI up only 5.4% and U.S. gas inventories building, which points to a Mideast risk premium on seaborne crude rather than a broad supply shortage. I am also sure the move is landing unevenly, with gasoline and the pump soft while the diesel spread widened to 1.456 and distillate margins stayed firm.
What I am not sure of is how long the split lasts. The diesel strength rests on tight supply and lower refinery runs, 16.615 and falling, with at least one large plant disrupted at Bayway. If those runs recover and the Mideast premium in Brent fades, the diesel spread could give back some of that 0.133. For now, a distillate-heavy operation is the one benefiting from this crude move, and a gasoline-only retailer is mostly watching it go by.
And that was just the data. See you tomorrow.